Are Consumers Willing to Pay More for Electricity from Cooperatives? Results from an Online Choice Experiment in Germany

Sagebiel, Julian and Müller, Jakob R. and Rommel, Jens (2013): Are Consumers Willing to Pay More for Electricity from Cooperatives? Results from an Online Choice Experiment in Germany.

Abstract

With liberalization in 1998, numerous firms have entered the German retail electricity market, including newly formed cooperatives. Based on Transaction Cost Economics, we develop a theoretical framework seeking to explain preferences for electricity supplied by cooperatives from a consumer perspective. Drawing on a convenience sample of 287 German electricity consumers and Choice Experiment data from an online survey, we estimate Willingness-to-Pay values for organizational attributes of electricity suppliers, while accounting for observed and unobserved heterogeneity. Consumers in the sample exhibit a large Willingness-to-Pay for renewable energy. Our results also indicate a substantial Willingness-to-Pay for transparent pricing, participation in decision making, and local suppliers. Democratic decision making – a distinct feature of cooperatives – exhibits positive Willingness-to-Pay values for approximately one fifth of the sample. Taken together, our findings suggest a slightly higher Willingness-to-Pay for electricity produced by cooperatives. Limitations of applied sampling and other important aspects of energy transition are also discussed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Choice Experiments; Cooperatives; Energy Transition
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C25 - Discrete Regression and Qualitative Choice Models ; Discrete Regressors ; Proportions ; Probabilities; D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices

References

Abebe, G.K., Bijman, J., Kemp, R., Omta, O., Tsegaye, A., 2013. Contract farming configuration: Smallholders’ preferences for contract design attributes. Food Policy, 40, 14–24.

Achtnicht, M., 2011. Do environmental benefits matter? Evidence from a choice experiment among house owners in Germany. Ecological Economics, 70, 2191–2200.

Akerlof, G. A., 1970. The Market for Lemons: Quality Uncertainty and the Market Mechanism. Quarterly Journal of Economics, 84, 488–500.

Álvarez-Farizo, B., Hanley, N., 2002. Using conjoint analysis to quantify public preferences over the environmental impacts of wind farms: An example from Spain. Energy Policy, 30, 107–116.

Baumol, W.J., 1977. On the proper cost tests for natural monopoly in a multiproduct industry. American Economic Review, 67, 809–822.

Bontrup, H.J., Marquardt, R.M., 2010. Kritisches Handbuch der deutschen Elektrizitätswirtschaft. edition sigma, Berlin.

Bonus, H., 1986. The cooperative association as a business enterprise: A study in the economics of transactions. Journal of Institutional and Theoretical Economics, 142, 310–339.

Borchers, A.M., Duke, J.M., Parsons, G.R., 2007. Does willingness to pay for green energy differ by source? Energy Policy, 35, 3327–3334.

Bougherara, D., Ducos, G., 2006. Farmers’ preferences over conservation contract flexibility and duration: An estimation of the effect of transaction costs using Choice Experiment. http://prodinra.inra.fr/#ConsultNotice:11024 (27 May, 2012).

Bundesnetzagentur, 2012. Monitoringbericht 2011. http://www.bundesnetzagentur.de/SharedDocs/Downloads/DE/Allgemeines/Bundesnetzagentur/Publikationen/Berichte/2011/MonitoringBericht2011.pdf?__blob=publicationFile&v=2 (30 June, 2012).

Bundesnetzagentur; Bundeskartellamt 2013. Monitoringbericht 2012. http://www.bundesnetzagentur.de/SharedDocs/Downloads/DE/Allgemeines/Bundesnetzagentur/Publikationen/Berichte/2012/MonitoringBericht2012.pdf?__blob=publicationFile&v=2, (1 September, 2012).

Chaddad, F.R., Cook, M.L., 2004. Understanding new cooperative models: An ownership–control rights typology. Review of Agricultural Economics, 26, 348–360.

Chaddad, F.R., Iliopoulos, C., 2013. Control Rights, Governance, and the Costs of Ownership in Agricultural Cooperatives. Agribusiness, 29, 3–22.

ChoiceMetrics, 2012. NGene 1.1.1 User Manual & Reference Guide. http://www.choice-metrics.com/documentation.html

Coase, R.H., 1937. The nature of the firm. Economica, 4, 386–405.

Coase, R.H., 1960. The problem of social cost. The Journal of Law and Economics, 3, 1–44.

Coast, J., Al-Janabi, H., Sutton, E.J., Horrocks, S.A., Vosper, A.J., Swancutt, D.R., Flynn, T.N., 2012. Using qualitative methods for attribute development for discrete Choice Experiments: Issues and recommendations. Health Economics, 21, 730–741.

Cornforth, C., 2004. The governance of cooperatives and mutual associations: A paradox perspective. Annals of Public and Cooperative Economics, 75, 11–32.

Degenhart, H., 2010. Die Finanzierung von Biomasse-Nahwärme-Genossenschaften: Ein Überblick. Working Paper Series in Business and Law, Nr. 6. http://www.leuphana.de/fileadmin/user_upload/Forschungseinrichtungen/ifwr/files/Arbeitpapiere/WPBL-No6.pdf (6 May 2012).

Dimitropoulos, A., Kontoleon, A., 2009. Assessing the determinants of local acceptability of wind-farm investment: A Choice Experiment in the Greek Aegean Islands. Energy Policy, 37, 1842–1854.

Draheim, G., 1955. Die Genossenschaft als Unternehmungstyp. Vandenhoeck und Ruprecht, Göttingen.

Flieger, B., Klemisch, H., 2008. Eine andere Energiewirtschaft ist möglich: Pionierfunktion neuer Energiegenossenschaften. http://www.cl-netz.de/foren/cl.medien.contraste/Schwerpunktthema:-Eine-andere-Energiewirtschaft-ist-m%F6glich-Pionierfunktion-neuer-Genossenschaften-(Teil-1)-55683.html (3 January, 2012).

Granovetter, M., 1985. Economic Action and Social Structure: The Problem of Embeddedness. The American Journal of Sociology, 91, 481–510.

Gros, J., 2009. Die Genossenschaft der Zukunft aus der Sicht des Verbandes. Zeitschrift für das gesamte Genossenschaftswesen, 59, 95–105.

Hanisch, M., Kimmich, C., Rommel, J., Sagebiel, J., 2010. Coping with power scarcity in an emerging megacity: A consumers’ perspective from Hyderabad. International Journal of Global Energy Issues, 33, 189–204.

Hanisch, M., Rommel, J., Müller, M., 2013. The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors. Journal of Agricultural & Food Industrial Organization, 11, 151-162.

Hansmann, H., 1996. The ownership of enterprise. Belknap Press, Cambridge, Massachusetts. Henry, G. T., 1990. Practical Sampling. Sage Publications, London, UK.

Hensher, D.A., 2010. Hypothetical bias, choice experiments and willingness to pay. Transportation Research Part B: Methodological, 44, 735–752.

Hensher, D.A., Shore, N., Train, K., 2005. Households’ Willingness to Pay for Water Service Attributes. Environmental and Resource Economics, 32, 509–531.

Hole, A., 2007. A comparison of approaches to estimating confidence intervals for willingness to pay measures. Health Economics, 16, 827–840.

Holstenkamp, L., Müller, J. R., 2013. Zum Stand von Energiegenossenschaften in Deutschland. Ein statistischer Überblick zum 31.12.2012. Arbeitspapierreihe Wirtschaft & Recht. Leuphana Universität, Lüneburg. http://www.leuphana.de/fileadmin/user_upload/PERSONALPAGES/_ijkl/janner_steve/Homepage_Master/wpbl_14.pdf, checked on 8/7/2013 (3 August, 2013).

Holstenkamp, L., Ulbrich, S., 2010. Bürgerbeteiligung mittels Fotovoltaikgenossenschaften: Marktüberblick und Analyse der Finanzierungsstruktur. Working Paper Series in Business and Law, Nr. 8. http://www.leuphana.de/fileadmin/user_upload/Forschungseinrichtungen/ifwr/files/Arbeitpapiere/WPBL8-101215.pdf (6 May 2012).

International Cooperative Alliance (ICA), 2012. Statement on the co-operative identity. http://www.ica.coop/coop/principles.html (20 February, 2012).

Jansen, D., 2012. Local utilities in the German electricity market and their Role in the diffusion of innovations in energy efficiency and climate change mitigation. in:

Jansen, D., Ostertag, K., Walz, R. (Eds.), Sustainabiliy in innovations in the electricity sector. Springer, Heidelberg, 1–26.

Jensen, M. C., Meckling, W. H., 1976. Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3,305–360.

Kaenzig, J., Heinzle, S. L., Wüstenhagen, R. 2013. Whatever the customer wants, the customer gets? Exploring the gap between consumer preferences and default electricity products in Germany. Energy Policy, 53, 311–322.

Klemisch, H., Maron, H., 2010. Genossenschaftliche Lösungsansätze zur Sicherung der kommunalen Daseinsvorsorge. Zeitschrift für das gesamte Genossenschaftswesen, 60, 3–13.

Lancaster, K., 1966. A new approach to consumer theory. The Journal of Political Economy, 74, 132–157.

Laurinkari, J., 1994. Principles of the cooperative system. in: Dülfer, E., Laurinkari, J. (Eds.), International Handbook of Cooperative Organizations. Vandenhoeck & Ruprecht, Göttingen, 708–716.

Louviere, J.J., Hensher, D.A., Swait, J.D., Adamowicz, W., 2000. Stated choice methods: Analysis and applications. Cambridge Univ. Press, Cambridge.

Louviere, J.J., Woodworth, G., 1983. Design and analysis of simulated consumer choice or allocation experiments: An approach based on aggregate data. Journal of Marketing Research, 20, 350–367.

Manski, C.F., 1977. The structure of random utility models. Theory and Decision, 8, 229–254.

McFadden, D., 1974. Conditional Logit analysis of qualitative choice behavior. in: Zarembka, P. (Ed.), Frontiers in Econometrics. Academic Press, 105–142.

Menke, N., 2009. Kooperation in der Energiewirtschaft: Chancen und Grenzen der Rechtsform eG. Zeitschrift für das gesamte Genossenschaftswesen, 59, 175–179.

Meyerhoff, J., Ohl, C., Hartje, V., 2010. Landscape externalities from onshore wind power. Energy Policy, 38, 82–92.

Michelsen, C.C., Madlener, R., 2012. Homeowners’ preferences for adopting innovative residential heating systems: A discrete choice analysis for Germany. Energy Economics, 34, 1271–1283.

Müller, J.R., Holstenkamp, L., 2012. Governance and financing of German energy cooperatives. Paper presented at the International Conference “Cooperative Responses to Global Challenges,” 21–23 March 2012, Humboldt-Universität zu Berlin, Germany.

Müller, J.R., Rommel, J., 2011. Is there a future role for urban electricity cooperatives? The case of Greenpeace Energy. in: Ramos-Martín, J.; Giampietro, M.; Ulgiati, S.; Bukkens, S.G.F. (Eds.): Can We Break the Addiction to Fossil Energy? Proceedings of the 7th Biennial International Workshop Advances in Energy Studies Barcelona, Spain 19–21 October 2010. Universitat Autònoma de Barcelona, 185–195.

Müller, J. O., 1976. Voraussetzungen und Verfahrensweisen bei der Errichtung von Genossenschaften in Europa vor 1900: Analyse der Strategien des Genossenschaftsaufbaus in den Frühstadien industriewirtschaftlicher Entwicklung. Vandenhoeck und Ruprecht, Göttingen.

Murphy, J.J., Allen, P.G., Stevens, T.H., Weatherhead, D., 2005. A Meta-analysis of Hypothetical Bias in Stated Preference Valuation. Environmental and Resource Economics, 30, 313–325.

Reise, C., Liebe, Ulf, Mußhoff, Oliver, 2012. Präferenzen von Landwirten bei der Gestaltung von Substratlieferverträgen für Biogasanlagen : ein Choice-Experiment. German Journal of Agricultural Economics, 61, 162–177.

Remoundou, K., Kountouris, Y., Koundouri, P., 2012. Is the value of an environmental public good sensitive to the providing institution? Resource and Energy Economics, 43, 381–395.

Roe, B., Teisl, M.F., Levy, A., Russell, M., 2001. US consumers’ willingness to pay for green electricity. Energy Policy, 29, 917–925.

Rommel, K., Hanisch, M., Deb, K., Sagebiel, J., 2010. Consumer Preferences for Improvements of Power Supply Quality: Results from a Choice Experiment in Hyderabad, India and Implications for Energy Policy. Paper presented at the European Conference of the IAEE, 25–28 August 2010, Vilnius, Lithuania.

Rose, J.M., Bliemer, M.C., 2008. Stated preference experimental design strategies. Handbook of Transport Modelling, Elsevier, Oxford, 151–180.

Rosen, S., 1974. Hedonic prices and implicit markets: Product differentiation in pure competition. The Journal of Political Economy, 82, 34–55.

Scarpa, R., Willis, K., 2010. Willingness-to-pay for renewable energy: Primary and discretionary choice of British households’ for micro-generation technologies. Energy Economics, 32, 129–136.

Seyfang, G., 2009. The New Economics of Sustainable Consumption: Seeds of Change. Palgrave Macmillan, Basingstoke.

Street, D.J., Burgess, L., 2007. The construction of optimal stated choice experiments: Theory and methods, Wiley series in probability and statistics. Wiley-Interscience, Hoboken.

Street, D.J., Burgess, L., Louviere, J.J., 2005. Quick and easy choice sets: Constructing optimal and nearly optimal stated choice experiments. International Journal of Research in Marketing, 22, 459–470.

Theurl, T., Kring, T., 2002. Governance Strukturen im genossenschaftlichen Finanzverbund: Anforderungen und Konsequenzen ihrer Ausgestaltung. Working Papers IfG Münster. https://www.wiwi.uni-muenster.de/06//nd/fileadmin/documents/workingpapers/AP27.pdf (3 May 2012). Thurstone, L., 1927. A law of comparative judgment. Psychological Review, 34, 273–286.

Williamson, O.E., 1985. The Economic Institutions of Capitalism. Firms, markets, relational contracting. Free Press, New York.

Williamson, O.E., 1991. Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36, 269‐296.